If you have been following Western media, you missed this.
The mainstream financial press has been preoccupied with the fallout of Silicon Valley Bank and the bailout of Credit Suisse, a Swiss bank.
But some of the most important news of this year came from China…
The country’s economy is struggling to rebound from its COVID-19 freeze.
So the government is doing what it does best: pumping money into the system.
Now, in the form of loans.
New Loans Reach a Record High in China
China’s government is desperate to turn around the country’s economy.
This is why it is “urging” lenders to basically make as many loans to the country’s businesses as possible.
Across the economy, financial institutions pumped $719 billion (or 4.9 trillion yuan) in new loans in January. That’s 23% higher than the previous record, at 4 trillion yuan.
Here’s why this is big news…
China’s Economy Will Keep the Cycle Going
The 18.6-year cycle is unfolding just as I expect it to.
The fact that the Federal Reserve is tightening its monetary policy is important… but it’s not the end of the story. In other words, the Fed cannot stop the cycle.
While it is trying to slow down growth to beat inflation, the Chinese government is doing the opposite.
After keeping its population in lockdowns for years, it now needs to show that it can also revive the economy and lower the country’s unemployment.
Credit is the perfect solution. It will provide businesses (the ones that didn’t go bankrupt due to the country’s draconian policies) funds to grow, expand, and hire.
There is also talk about China’s government lowering interest rates to stimulate its economy.
In other words, while the U.S. government and the Fed are trying to slam on the brakes, China is trying to boost its economy as much as it can.
And don’t forget that China is the world’s second-largest economy, with a GDP of $18 trillion.
Given its thirst for growth, I expect that it will do whatever it takes to pump liquidity into the system – and keep the global asset cycle going.
Ignore the headlines. The global financial system isn’t falling apart. In fact, I believe we’re in for one of the best bull markets over the next couple of years.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson